Soccer in China Is Finally Starting to Fulfill its Potential

Soccer in China Is Finally Starting to Fulfill its Potential

Those of you who have read my posts over the years may well be saying, “Here he goes again”.

It certainly is not the first time I have written about the potential for soccer as a business in China, and I will certainly admit that it has taken longer to evolve from a state-owned and (badly) directed sport into one which now starts to have the hallmarks of sport as a business.

The most important signal of the change is Li Ruigang’s China Media Capital (CMC) committing RMB 8 billion for the broadcast rights for the Chinese football league. That is a 30-fold increase over the prior contract.

Moreover, CMC beat CCTV, the state broadcaster, for the rights to content that many at CCTV believed was automatically theirs whatever they chose to pay for it. Let’s see how he is able to monetize this. I can’t see being able to sell any TV rights internationally but domestically there are many options for monetizing as an online, mobile-centric service.

Performance is improving at least at the top of the league. Guangzhou Evergrande is back in the final of the Asia Club Championship again this year for the second time in 3 years. They drew 0-0 in the first leg away to Al-Ahli. In addition, they have won the national title for 5 years in a row.

This kind of dominance is common in a league as it reaches early stages of maturity. One team steps way out ahead and becomes the role model and target for all others, who gradually copy and finally become competitive. Often, as in this case, the teams are not in the capital city.

The value of the teams themselves is still low. Jack Ma bought half of Evergrande in 2014 for less than USD 200 million. Other teams would be currently valued at far less. But as soccer develops into a high quality “service industry” in China, values could rise fast. Returns to team ownership, to media ownership, and to the players look to have great potential.

I expect the next couple of years to see many teams acquiring new owners, some of which will be from outside China. I believe it is more likely that the owner of an English Premier League team will acquire a Chinese team than a Chinese owner acquiring a Premier League team. It’s not impossible that a Premier League team will have a Chinese owner, there are few meaningful restrictions on who buys a team, but it certainly won’t be a Chinese state-owned enterprise, as was speculated about in the media recently.

Returns to players will rise particularly fast, not only because they have been held down in the past and this is no longer possible. It is because one of the unique characteristics of the timing of soccer development in China is that it emerges into a mobile social media world. Fans often follow players as much as they follow teams. Players should be able to monetize themselves directly to tens if not hundreds of millions of fans, endorsing products, selling sportswear, making appearances and more. For some, the team will simply be a platform (on which they must perform) for greater wealth creation beyond the game itself.

What still lags of course is the performance of the Chinese national team. But if the English Premier League proves anything, it is that you can have an incredibly valuable professional soccer industry in a country with a national team that has not come close to winning anything for almost 50 years.

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